Give More Money to the Unemployed

The best stimulus policy would be simpler and more generous help for
the unemployed. On paper, direct government purchases of goods or
services with high domestic content ought to give the economy a bigger
push per dollar--infrastructure spending, or accelerated replenishment
of run-down military inventories, for instance. But the discretionary
element in initiatives like these has been a problem. Actually getting
the money spent is hard. In the same way, aid for state and local
governments ought to pack a lot of punch as well, but it hasn't.
States have applied a lot of the aid they received not to maintaining
jobs and services, as intended, but to improving their financial
balances. Just as consumers can save a tax cut, states can save their
federal aid--and they have.

The unemployed, especially those with limited savings, will spend all
or most of their benefits. And they just happen to be the principal
victims of the recession, so calculations of equity and stimulus power
point the same way. Access to benefits is too complicated. The rules
reduce take-up; the goal should be to increase it. Numerous ad hoc
changes in eligibility and duration, like those seen of late, make
matters worse. Unemployment insurance needs to be simplified and
codified in a settled way, so that people understand the system and
more of them can get the help they need when they need it. A
well-designed system provides timely help and effective stimulus
automatically [itals], with no need for political intervention--a big
advantage so long as Congress remains a broken institution.

Aid for the unemployed needs to be extended in other ways. Generous
support for retraining and relocation should be part of the package. A
template exists in the Trade Adjustment and Assistance program, which
the Obama administration wants to enlarge (as part of efforts to
establish new free-trade agreements). Republicans resist the idea. The
administration is right, but needs to be more ambitious. TAA confines
its help to those who are unemployed because of imports, which narrows
take-up and piles on the complications. From an equity point of view,
this restriction is absurd. Unless it was your own fault, it should
not matter why you became unemployed. TAA-like assistance needs to be
scaled up that it is available for every victim of the recession.